Why is the principle of diminishing marginal product only valid in the short run?

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1114085

2026-04-15 23:15

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The principle of diminishing marginal product is only valid in the short run because it assumes that at least one factor of production is fixed, such as capital or land. As additional units of a variable factor, like labor, are added to a fixed resource, the additional output produced by each new unit of labor eventually decreases. In the long run, all factors of production can be adjusted, allowing firms to optimize resource allocation and potentially avoid diminishing returns. Thus, the principle does not hold when all inputs can be varied.

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